Cities keep the lights on for homeowners
A boarded-up house can represent a devastating foreclosure for a homeowner. Yet for a city or county, it also can represent a blight on the community and a drain on local resources. With foreclosures mounting across the nation, officials are enlisting public and private support to keep residents in their homes.
In the third quarter of 2006, 318,355 properties entered foreclosure nationwide, a 43 percent increase compared to the same time last year, according to Irvine, Calif.-based RealtyTrac. Potentially leading to problems such as lower property values and higher crime, residential foreclosures cost local governments directly. Sometimes involving more than a dozen agencies, including police and fire departments, one foreclosure can cost a local government more than $30,000, according to the Minneapolis-based Homeownership Preservation Fund’s May 2005 report “Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom.” Faced with dire consequences, local and state governments are taking action to reverse the trend.
Cuyahoga County, Ohio, has approximately 10,000 new foreclosures each month — one of the nation’s highest foreclosure rates — because of “the perfect storm of factors,” including a stagnant economy, lagging housing prices and abusive lending practices, says Mark Wiseman, director of the Cuyahoga County Foreclosure Prevention Program. Initiated in fall 2005 and with nearly 50 partners, the Foreclosure Prevention Program uses its $1 million annual budget to educate and help homeowners.
In March, the county launched a 211 phone number for residents in any stage of foreclosure. The number connects homeowners with a non-profit agency that can offer budgeting advice or help work out a payment plan with the lender. “It’s so important for a program to let borrowers know to contact their lender when a problem arises,” Wiseman says.
In addition to educating homeowners, the county also has streamlined its foreclosure process to reduce the amount of time before a property reaches a sheriff’s sale. Also, in May, the county hired a prosecutor to focus on predatory lending and mortgage fraud, with indictments issued against 70 defendants at the beginning of January.
Boston recorded 260 foreclosures and 1,442 foreclosure petitions in 2006, fewer than other cities of comparable size but more than four times the number seen in 2005. Like Cuyahoga County, Boston is educating its residents about risky mortgages and recently doubled the number of “credit smart” classes it offers, which focus on such topics as avoiding credit traps and becoming a homeowner. The city also is hosting foreclosure seminars and holding classes on “exotic mortgages.”
In addition, the city is enlisting a host of public and private agencies to help reduce foreclosures. “For these programs to really be effective, you need to engage the industry, government and local agencies,” says Bill Cotter, deputy director of Boston’s Department of Neighborhood Development (DND). DND secured $100 million from six banks to establish a refinancing consortium that will help homeowners switch from adjustable rate to less-risky, fixed-rate mortgages. Mayor Thomas Menino, meanwhile, is working with state lawmakers to pass legislation filed in January that would apply the Community Reinvestment Act’s standards for banks to mortgage companies.
States with widespread foreclosure problems also are tackling the issue. In October, Colorado launched the first statewide hotline that connects residents with one of 30 counseling agencies. The initiative resulted from a state foreclosure taskforce comprised of public trustees and individuals from the mortgage, banking and real estate industries, and non-profits.
By January, the hotline had fielded 6,500 calls and received more than $150,000 in donations, says Colorado Division of Housing Director Kathi Williams. Counselors working with residents report possible cases of predatory lending practices to the attorney general’s office for review. In an effort to reach homeowners as early in the foreclosure process as possible, the state recently began airing public service announcements to promote the hotline and is contacting homeowners when they miss one payment. “The main goal now is to stop the bleeding as much as we can for those facing foreclosure,” Williams says.
Jennifer Grzeskowiak is a Laguna Beach, Calif.-based freelance writer.
